Data and code for: Pre-test with Caution: Event-study Estimates After Testing for Parallel Trends
Principal Investigator(s): View help for Principal Investigator(s) Jonathan Roth, Brown University
Version: View help for Version V1
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Project Citation:
Project Description
The abstract of the paper is as follows:
This paper discusses two important limitations of the common practice of testing for pre-existing differences in trends (''pre-trends'') when using difference-in-differences and related methods. First, conventional pre-trends tests may have low power. Second, conditioning the analysis on the result of a pre-test can distort estimation and inference, potentially exacerbating the bias of point estimates and undercoverage of confidence intervals. I analyze these issues both in theory and in simulations calibrated to a survey of recent papers in leading economics journals, which suggest that these limitations are important in practice. I conclude with practical recommendations for mitigating these issues.
Scope of Project
C10 Econometric and Statistical Methods and Methodology: General
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